Apple Carries The World On Its Shoulders: Market Snapshot

As we said yesterday, traders could have just slept through the entire day, ignored headlines about mad cows, auctions of European bonds maturing in a few weeks, speculation of Europe's alleged falling out favor with austerity which is very much irrelevant as all that matters is what German taxpayers/voters say, and the SEC's latest laughable scapegoating attempts, and just woken to the 4:30 pm announcement of iPhone sales in China. As expected, the entire world is now reacting. Here is Deutsche Bank's Jim Reid with the global response to the world's ongoing fascination with aspirational cell phones.

From DB:

Overall Apple reported Q2 EPS and sales that came around 23% and 6% higher relative to market consensus. Actual earnings were almost doubled over the quarter driven by iPhone demand in China. Earnings and revenue outlook for Q3 were somewhat weaker though relative to market consensus but this is something they make a habit of doing. The company guided to a Q3 EPS of $8.68 and revenue of $34bn which compared to prevailing market consensus of $9.96 and $37.49bn. Nevertheless the results came as a relief for the stock that has fallen in 10 of the last 11 days. Apple rallied as much as 7.8% in after hours after having closed 2% lower on the day.

Earnings seem to be helping Asia slightly as bourses are mostly higher on the day led by better gains in Japan (+0.8%) and Taiwan (+0.8%). The Shanghai Composite and the KOSPI are around +0.3% higher while the Hang Seng is largely flat as we type. Asian credit markets are little changed as are Copper and Oil.

Asia is also being encouraged by a positive session in the US and European markets yesterday. The S&P 500 gained 0.37% helped by again another day of positive earnings. Of the 40 companies that reported yesterday 31 topped EPS expectations. Better US housing data also helped as house prices in February rose more than expected (+0.3% v +0.1%) and the Richmond Fed manufacturing index (14 v 6) also surprised to the upside. Elsewhere, Cattle futures were limit down in the US session (but somewhat firmer in Asia overnight) after a case of mad-cow disease was discovered in central California.

Across the Atlantic, European equities rebounded strongly as sovereign concerns were soothed by a decent Spanish and Dutch auction. The CAC, DAX and FTSE MIB rose 2.29%, 1.03%, and 2.48% respectively. Spain sold EU1.9bn in bills, which is close to the reduced target amount albeit with higher yields of late.

ECB’s Paramo seemed confident that the Spanish government will find a way to deal with the banking sector and added that ways are being considered to find “imaginative formulas to segregate troubled assets”. This gave the market some confidence that plans are afoot. Elsewhere the EFSF issued EU3bn in 7yr notes at 77bp on reportedly good demand. Spanish and Dutch 10yr bond yields fell 13bp and 9bp to 5.82% and 2.32%, respectively.

Elsewhere in Europe, the Greek central bank downgraded its forecast for the economy expecting it to shrink by about 5% (vs a 4.5% forecast a few weeks ago). Indeed in quite alarming stats given by Antonis Samaras, Greece had 1million companies in 2009 but 250,000 have since closed and 300,000 more do not pay their workers on time. However, the ‘good news’ is that the central bank was rather optimistic about achieving a primary budget surplus next year. The central bank also warned of downside risks to its growth forecasts if there are delays in implementing structural reforms. Austerity versus growth has always been a tough balancing act with the former being forced on Europe. That may change over time as the popular backlash against austerity escalates perhaps encouraged by the ongoing French elections and the recent Dutch rebellion. This is something I talked about yesterday in the call. Interestingly the WSJ yesterday wrote that some within the EU political circles are acknowledging that a better balance is perhaps needed in light of the growth problems and an option is to place the actual budget deficit on an “equal footing” with the “structural” deficit. A draft EU document obtained by Reuters showed that the European Commission will today propose a 6.8% increase in the EU’s budget next year despite calls for fiscal discipline.

Moving along we have another eventful day ahead of us. The FOMC is clearly a key event for markets. The statement is due at 12.30pm NY time ahead of the Fed Funds Rate projection at 2pm, and Bernanke’s press conference at 2.15pm NY. Overall our chief US economist does not expect the Fed to show any change in its current policy stance, including its conditional expectations to hold rates near zero at least through late 2014 as well as its intention to complete its twist program in June. Markets will pay attention to the FOMC’s economic forecasts and the tone from Bernanke’s press conference. Data wise durable goods orders will be the key US release. In Europe all eyes will be on the ECB lending survey. The reading remains a critical factor affecting euro area growth although our European economists highlight that even if we see some tentative loosening in credit standards today (perhaps due to LTRO effect) there may still be a lag of 2-3 quarters before it translates into positive momentum for credit origination. We also have the first reading of Q1 GDP in the UK today.

Most of Apples sales are international. Asians are not buying Apple products with foodstamps although one guy sold his kidney to get an iPad.

Asians for the most part live in compact apartments and don't have the room for lots of clutter and junk. That is why they are focused on high end and prestige consumer goods. They always have been. Luxury goods and jewelry sales have always been concentrated in Asia. Just as an example, men are obsessed with collecting limited edition watches and women regularly trade up on handbags.

So it is not surprising that Asians, now primarily Chinese, are going ape shit over retinal screens and iPhone models etc. Apple is in the right place at the right time. It could have been someone else, but it's not. BTW, they are also obsessed with digital photography so the retinal screens are a big deal to them.

The rubes in the market have no clue as to what is really behind Apple. This was confirmed in the past ten days.

Apple has now gone hegemonical thanks to its I-pod success that launched it into the music niche. Subsequent launches of i-phone and i-pad, were enormous successes. I-pad has been niche marketd NOT to cannibalise its Macpro books which allow full text capability.

But what Apple is now aiming at is extending into multi-media hegemony by going into closed loop TV and closed loop "domotic" services whereby the home electronic-digital revolution will make it service provider into this new personal eco-system market.

Its a much more ambitious plan than what you refer to; and what is ominous is that it is CLOSED CIRCUIT; in terms of technology.

It is debatable that a civilization that puts a market value on a company like Apple as #1 on the stock exchange, is barking up the wrong tree. Our major conundrum is basic human needs in this current century : food, water, air, energy; not I-pads. Not paranoid culture of uber-alles profit generation inventions on non essential stuff.

7 come 11. Capital controls precede population controls. Really. Who gives a fuck about AAPL when the US Government can just suggest you owe taxes so they can confiscate - revoke - your passport.

No one wants to take on the police unions which lays the ground work for the police state. Except people - law enforcement - have to face their communities. And that is where King George failed to understand the resolve. At what juncture will the dependency on the digital world implode. Held captive by governments the digital world will go underground and/or just shunned. Neither bodes well for "ongoing concerns."

Chaos and volatility. Everyone reading zerohedge knows this. SB1813 reeks of desperation like Sonny in Dog Day Afternoon. You can't be the good guy and the bad guy. The window in which both coexist is nearly closed. What comes next is anyones guess.

The NYFed can't force people to buy gasoline. Sell in May and go away. Keep it simple.

When you read it you realise that SJ was a true DICTATOR. Take it or leave it, power play all the way. Keeping people in the dark, no top down -bottom up corporate dialogue...wow, quite the opposite to what comes accross on Apple culture in their public shows on Internet which were world wide! It looked so cool and consensual. Big razmataz of US corporate hyperbole.

Seriously, there are obviously some very smart people running the finances and managing market perception at Apple. But that is not the obsession of management there. They are obsessed with product innovation, commercialization, delivery and performance and for the time being they still believe they can do things their way.

I would say the time to dump Apple would be the day they decde to do what everyone else thinks they should do to protect the share price. I don't see that happening anytime soon. But they are not impervious to it either human nature being what it is.

It's not apple that carries the world on its shoulder, it is labor and what the planet offers in resources. Since governments and bankers have been able to pervert the market place and perceptions of the real worth of goods and services you have a gadget and the structure around it worth as much as the rest of the whole retail sector. Madness.

Did all of QE2 go into AAPL? I really think AAPL is a bubble. It took the U.S. 2 quarters to peak iPhone sales after its debut on Verizon. I expect the same in China and probably sooner since the chinese have a habit of conterfeiting goods. So unless AAPL expands into Africa soon there will be no/declining growth from next year on.

I'm looking at the european rallies underway today. Risk on, short covering, optimism everything will be handled by the CBs, Apple stock price making fools out of sellers and shorts for the past number of days.

Crazy stuff. Add in the Fed meeting and conference this afternoon. Mix well. Rally, rally, rally. Senseless optimism runs amok. The only question is whether the US indices make closing highs today or will it take two days.

It's unbelievable the weight Apple stock performance has on the markets overall.

I do not think anyone wins trading Aapl. Lately they have taken the stock to extremes, up an down.

It kills Shorts and then turns around and kills Longs. Wonder how many Longs that were over Margined got sold out from the drop. And in the reverse how many Shorts got sold out from Margin calls on the way up.

I have made some Money trading Aapl but it always has been a gut renching experience.

they carry no weight of anything on their shoulders. Indeed..."here's your flashlight" for the damsel in distress in your slasher flick. "And Google will follow right through." The beauty of course is that the majority of these folks "are kids who have no idea what they're doing." Here's to them finding the right girl...or even "a girl period"!http://www.youtube.com/watch?feature=player_detailpage&v=H33vSYapNNs